There needs to be an adjustment because none percent of the portfolio is invested in mutual funds denominated in euro but invested in emerging currencies.

The funds held are Jyske Invest Emerging Bonds Fund (6% of the portfolio) which holds a spread of emerging currency bonds (EMCS) but is denominated in euro.

The other fund is the Jyske Invest Turkey Equity Fund (3% of the portfolio) which invests in Turkish Try denominated equities but is denominated in euro.

This changes the currency allocation to

US$ 15.0%
CAD 4.0%
NZD 2.0%
AUD 0$ Bloc 21.0%

GBP 8.0%
DKK 18.0%
SEK 4.0%
EURO 24.0%Euro bloc 54.0%

TRY 6.0%
HUF 7.0%
BRL 6.0%
EMCS 6.0% Emg Curr 25.0%

From

$ Bloc 21.0%
Euro Bloc 62.0%
Emerging Currencies 17.0%

to

$ Bloc 21.0%
Euro bloc 53.0%
Emerging Currencies 26.0%

There are several points to learn from this.

First, a mutual fund’s price will move in relation to the investments in the portfolio… not the denomination of the fund.

Take for example the Jyske Invest Turkish Equity Fund denominated in euro. If the euro tanks but Turkish equities and the TRY rise… the fund’s price will also rise.

Second, this currency spread is a vote against the US dollar.

Third, this currency spread is based on global economic optimism… thus so much in the emerging currencies.

Fourth, this currency spread is recognizing global economic risk…. which is why it has a mix of ten currencies.

Jyske Invest Turkey Equity Fund

I have only four equity positions and Turkey is one of them due to Turkey’s role in the battle between Islam and Christianity. Turkey is an Islamic nation with a democratic, capitalistic, non-secular government. The world cannot afford to let Turkey fail. Making Turkey successful is the one way to show others that the Western philosophies of business can work in harmony with Islamic versions of religion.

Also the Turkish equity market tends to rise in sudden dramatic spurts, usually after the Turkish lira has sagged. The lira sagged badly versus the greenback during the economic downturn. You can see how nicely both the Lira and TRY has recovered in these charts from www.tradingeconomics.com.

At the beginning of 2009 a dollar bought about 1.55 TRY. Then a dollar rose to 1.82 TRY but has slid back to 1.48 TRY per dollar.

The Turkey equity market has recovered as well.

The price of the Jyske Invest Turkey shares I hold are up 82% in 2009… in Euro… so they have more than doubled since the beginning of 2009 in US dollar terms.

Turkey also has some problems, that if solved, could boost the equity market there a lot.

Jyske Invest says:

Turkey still has not entered into an agreement with the IMF. It is very important for the economic development that this succeeds. An agreement with the IMF will help Turkey finance its major current-account deficit and strengthen the public finances that are under pressure due to the weak economy. Last but not least, an agreement will give investors confidence in the economic development in Turkey. This is very important for a debt-heavy economy as the Turkish one. We expect that Turkey and the IMF will finally enter into an agreement – but it may not be until in the course of the autumn.

Despite the heavy price increases in Q2, Turkish equities are still some of the cheapest equities in Eastern Europe. But the equities have risen due to a declining risk aversion and falling interest rates in Turkey. And it is still too early to hope for a fundamentally-driven upturn in the equity market.

So much of the Turkish equity growth to date has been from speculation. There is still room for good fundamental economic growth in Turkey.

The chart from Jyske Invest also shows that Turkey’s equity market is still low compared to previous high levels.

Non US residents can learn more about the Jyske Invest Turkey Equity Fund from Rene Mathys at Jyske Bank Private Bank at mathys@jbpb.dk

An alternative for US resident investors is the iShares MSCI Turkey Invest Mkt Index ETF (symbol: TUR): up almost 100% year-to-date

A June 2009 www.etftrends.com article “Why Turkey’s ETF May Be Worth a Look” by Tom Lydon says: While political unrest grips the Turkish government, recent economic data shows the economy and the related exchange traded fund (ETF) could be on the mend.

On Tuesday, Turkey’s Central Bank reduced its interest rate from 9.25% to 8.75%, which is also a new record low. A surge in consumer confidence and drop in unemployment rate prompted the Central Bank to ease money lending.

Consumer confidence is rising, but demand from Europe, the main importer of Turkish goods, is still weak. Inflation is at its lowest level in 39 years. However, the low price levels may be reversing as oil prices continue to increase.

This chart shows how this ETF price has almost doubled in the first ten months of this year as well.

US investors can learn how to buy this fund from JGAM from Thomas Fischer at fischer@jgam.com

Gary

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